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WeWork throws in the towel on ill-fated IPO

According to the IPO prospectus it filed earlier in September, We Company had cash and cash equivalents of roughly $US2.5 billion ($3.7 billion) as of June 30. However, while revenue doubled to nearly $US1.8 billion in 2018, its losses also more than doubled to $US1.9 billion.

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The decision to scrap the public share sale will also put pressure on WeWork to secure alternative funding, given that a $US6 billion loan deal with banks, agreed last month, hinged on a successful share sale of at least $US3 billion. Analysts have projected that WeWork will burn through several billion dollars over the next few years and thus needs to keep on raising fresh funds at favorable valuations.

According to two sources familiar with the matter, the company is currently looking to trim its workforce and slow down its expansion in order to burn through less cash and be less dependent on fresh funding.

The company is in talks to raise fresh funding from investors, including SoftBank, the sources added.

SoftBank, which had been pushing WeWork to postpone its IPO and is currently attempting to raise its second $US100 billion-plus Vision Fund, is under pressure to assuage key backers of the fund who have raised concerns over the long-term viability of the investment fund.

The decision to withdraw the IPO was no surprise, though. It was widely expected after the company postponed the share sale earlier in September, following push-back from prospective stock market investors over its widening losses and Neumann’s unusually firm grip on the company.

SoftBank-backed WeWork is looking to trim its workforce and slow down its expansion, sources say.

SoftBank-backed WeWork is looking to trim its workforce and slow down its expansion, sources say.Credit:Getty Images

“We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong,” WeWork’s newly appointed co-CEOs Artie Minson and Sebastian Gunningham said on Monday.

“We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future,” Minson and Gunningham added.

SoftBank, which owns nearly a third of We Company, invested in the startup at a $US47 billion valuation in January. But investor skepticism led to it earlier this month considering a potential IPO valuation of as low as $US10 billion, Reuters reported.

We Company had vowed to pursue the IPO and complete the share sale by the end of the year after Neumann stepped down as CEO. However, sources had told Reuters last week that the IPO was unlikely to be completed this year.

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WeWork’s doomed IPO marks a rough period for startups that have been going public in recent weeks. Last week, US entertainment and talent agency company Endeavor Group Holdings pulled its IPO, while shares of Peloton Interactive , the fitness startup known for on-demand workout programs on its exercise bikes, slid as much as 7 per cent in their market debut.

Earlier in September, teeth alignment firm SmileDirectClub opened to an underwhelming debut.

Ride-hailing companies Uber and Lyft also went public earlier this year with high expectations, but their shares have tumbled since then after investor concerns over their steep losses.

Reuters

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